Using Bayesian methods, we analyze whether a volatility reduction as sharp as documented
for growth of U.S. gross domestic product (GDP) in the mid-1980ies can also be detected for
German GDP growth. Our analysis, based on different time series models allowing for alterna-
tive characterizations of output stabilization, provides across all models empirical evidence for a
decline in the output volatility around 1993. Furthermore, we assess competing explanations for
reduced output volatility. The results suggest that the main source for the volatility reduction is
an ongoing structural shift accelerated by the German reunification and accompanied by changes
in the correlation structure between individual GDP components.